The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous and statutory body under the Ministry of Finance, Government of India, tasked with regulating and developing the insurance and re-insurance industries. It was constituted by the Insurance Regulatory and Development Authority Act, 1999, an Act of Parliament. The origin of the IRDAI lies in the recommendations of the Malhotra Committee (Committee on Reforms in the Insurance Sector), which was set up in April 1993 under the chairmanship of R. N. Malhotra, former Governor of the RBI. The Committee submitted its report in 1994, recommending that the private sector and foreign companies (through joint ventures) be allowed to enter the insurance sector, and that an independent regulatory body be established to oversee the industry. The creation of the IRDAI in 1999 solved the problem of a closed, government-controlled insurance sector by opening it up to competition while ensuring policyholder protection and financial security.
The mechanism of the IRDAI is governed by the IRDA Act, 1999, with Chapter IV laying down its duties, powers, and functions. Key provisions include the mandatory registration of insurers with the IRDAI, the regulation of insurance intermediaries like agents and brokers, and the oversight of premium rates and claims settlement practices. The Authority is responsible for protecting policyholders' interests through transparency, grievance redressal, and specifying solvency margins to ensure the financial soundness of insurance companies. The IRDAI is connected to the Insurance Act, 1938, as it has the power to frame regulations under Section 114A of that Act.
Recently, the IRDAI has undergone significant changes, particularly with the implementation of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. This new framework has led to amendments like the replacement of periodic registration renewals for insurance intermediaries with a perpetual registration system. A major change is the mandatory tagging of an authorised salesperson to every insurance proposal and policy, which is intended to enhance accountability and traceability in the distribution process. Furthermore, the Policyholders' Education and Protection Fund (PEPF), constituted under Section 16A of the IRDA Act, has been operationalised to boost awareness and trace unclaimed insurance money. The core function of regulating the industry and protecting policyholders' interests has stayed the same, but the mechanisms for achieving this have been updated to align with the new Act.